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This combination of undated family file photos shows, Natasha Weigel, left, and Amy Rademaker. The families of Natasha Weigel and Amy Rademaker, two Wisconsin teenagers killed in a car crash involving a faulty General Motors ignition switch have dropped their ... more >

DETROIT (AP) - The families of two Wisconsin teenagers killed in a car crash involving a faulty General Motors ignition switch have dropped their lawsuit against the company and are seeking a settlement with the automaker.

The Oct. 24, 2006, crash that killed Natasha Weigel, who was 18, and Amy Rademaker, who was 15, was among the first blamed on the faulty switches, and evidence from the crash exposed how GM and federal regulators missed clues that could have prompted a recall of the cars as early as seven years ago.

Instead, GM failed to recall 2.6 million cars equipped with the switches until earlier this year.

Despite evidence that people within GM knew for years about a defect in the ignition switches in Chevrolet Cobalts and other small cars, the families face tough going in court because of the legal protection GM has from liabilities incurred prior to its 2009 bankruptcy. The families and their attorney, Robert Hilliard, dropped the suit on July 31, then filed a wrongful death claim with Kenneth Feinberg, the compensation expert hired to settle with victims on GM’s behalf.

Representatives of the victims of any crash that preceded GM’s bankruptcy face a similar choice. Hilliard is among a number of lawyers trying to get GM’s so-called bankruptcy shield revoked, but he said judges rarely unravel a corporate bankruptcy agreement.

Rademaker’s mother, Margie Beskau, of Woodville, Wisconsin, saw little chance the lawsuit would succeed. “GM is hiding behind their bankruptcy, so it would make it very difficult for us to sue them, because Amy died before they filed that bankruptcy,” she said.

The girls’ deaths are among 21 that Feinberg has deemed eligible for payments from GM since he started accepting claims on Aug. 1. He has received 143 death claims, with the rest still being evaluated. On Wednesday, his spokeswoman said he had made the first cash compensation offers to 15 claimants.

Feinberg informed Hilliard of his offers to the families on Wednesday as well. Hilliard described them as “fairly fair,” without disclosing the amounts. Earlier he said that under Feinberg’s compensation formula, he expected each family to get at least $3 million. The families can refile the lawsuit if they aren’t satisfied with the offers.

GM has admitted it knew about the flawed switches for at least a decade before issuing a recall. The switches can unexpectedly slip into the “accessory” position, shutting off the engine and disabling key features such as power-assisted steering, and the car’s air bags. Congress and the Justice Department are investigating GM’s handling of the recall.

The car’s driver, Megan Phillips, also a plaintiff in the lawsuit, survived the crash but suffered permanent brain damage. The data recorder in her 2005 Cobalt showed that the ignition switch was in “accessory” at the time of the crash.

A Wisconsin state trooper investigating the crash made the connection between the defective switch and the air bags not deploying. A report commissioned by GM, and a separate report from a Congressional committee on the role of the National Highway Traffic Safety Administration, said both the company and regulators were aware of the trooper’s finding but largely ignored it for years.

The move to drop the lawsuit, despite the strong evidence against GM, illustrates the difficulty pre-bankruptcy plaintiffs face because of the bankruptcy shield, said Carl Tobias, a law professor at the University of Richmond in Virginia. It makes Feinberg a better option than a potentially costly and lengthy court case.

Tobias said there’s little risk to making a claim with Feinberg because the plaintiffs aren’t obliged to accept his offer.

“Everyone is making the same calculus,” he said. “Hilliard knows that that just may be a long, tough fight to win a civil case, and he may not come out with any more money.”

For GM, Tobias said, it’s advantageous to encourage settlements with Feinberg - even for millions of dollars - to avoid bad publicity, legal costs and the risk of huge verdicts. The automaker has set aside $400 million in its compensation fund and may pay out up to $600 million.

Families of victims of crashes that happened after July 2009 may be willing to fight in court because GM can be found liable for death or injury. For example, the family of Brooke Melton, a Georgia nurse who died in a 2010 Cobalt crash, settled last year for $5 million. But, citing what they say is new evidence that GM concealed the switch problem, the Meltons want the settlement overturned so they can seek a larger jury verdict. They also want company executives to be questioned under oath.

When the Rademaker and Weigel families told Feinberg their stories in August, “he wanted to get to know us so he could actually get a sense of who our daughters were,” Beskau said. “To him, they are not just numbers, they are people.”

Hilliard said Phillips will present her case at a later date.

Feinberg previously handled payments to victims of the 9/11 terrorist attacks and the BP oil spill. The families, Hilliard said, told Feinberg of a circumstance that might warrant compensation above the standard formula.

The night of the crash, the identities of the heavily bruised and swollen girls were somehow mixed up. So Weigel’s family was at Rademaker’s side when she died while Rademaker’s family waited for Weigel to come out of surgery. The mix-up was sorted out quickly, but not until it caused additional heartache for the families.